Bank of Canada expected to hold key interest rate steady today, with economists divided on future hikes

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Updated 4 mins ago

Bank of Canada expected to hold key interest rate steady today, with economists divided on future hikes

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Wed, January 28, 2026 at 8:53 AM EST

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The Bank of Canada (BoC) is expected to hold its benchmark interest rate at 2.25 per cent for a second consecutive announcement when it reveals its decision at 9:45 a.m. ET today. The scheduled interest rate decision comes amid ongoing trade uncertainty, with increasing focus on the future of the Canada-U.S.-Mexico-Agreement (CUSMA) and a murky outlook for the Canadian economy later this year.

Ahead of the announcement, economists polled by Reuters were unanimous in their expectation for a hold, and nearly 75 per cent forecast the central bank will keep rates on hold through 2026. Market odds for a hold today were at 91.8 per cent, according to LSEG data.

Ahead of the BoC’s December decision to hold, markets had flirted with the idea of interest rate hikes later in 2026. But they are “now leaning ever so slightly to cuts in the first half of the year again,” BMO economist Benjamin Reitzes said in a preview note. Reitzes wrote that “the key concern” is the fate of CUSMA, underlined by ongoing pessimism in the latest BoC business and consumer surveys, with recent, uninspiring jobs and other economic data adding to a “softer backdrop.”

Today’s announcement will also feature the BoC’s latest Monetary Policy Report, which outlines its base-case outlook for the economy and inflation.

Follow Yahoo Finance Canada’s live blog for news, updates and analysis of the Bank of Canada’s interest rate announcement below.

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7 updates

• 4 mins ago John MacFarlane

  'Arguably the most important soft data in Canada'

  At the BoC’s July 2025 announcement, governor Tiff Macklem noted that the central bank was adding new questions to its quarterly business and consumer surveys as a response to the muddier outlook caused by trade uncertainty.

  Those surveys, National Bank of Canada economists Taylor Schleich and Ethan Currie say in a January 19 note, present “arguably the most important soft data in Canada,” and have offered a different view of the economy than that depicted by “harder” employment and GDP data.

  “[I]t’s difficult to have much confidence in the Canadian resilience narrative when soft data consistently cast the outlook in a pessimistic light,” the economists said. They note “concerning” layoff intentions and “still lingering” cost pressures even though the surveys show some signs of improving sentiment. Over at Desjardins, economist Royce Mendes says the surveys “offered another tepid assessment of economic conditions."

  None of the economists expect the survey data to sway the BoC today. But the National Bank economists, who had forecast a rate hike later this year, say the weakness suggested in the surveys isamong factors causing them to “readily concede” that rate hikes may not happen till 2027.

• 12 mins ago Jeff Lagerquist

  How fast will Canada's economy grow in 2026?

  Back in its October Monetary Policy Report, the BoC called for Canada’s economy, as measured by real gross domestic product, to grow at 1.4 per cent in 2026.

  Here’s a look at some of the private-sector forecasts released since then.

  Vanguard Canada is calling for real GDP growth of around 1.6 per cent in 2026, bolstered by resilient consumption, better labour conditions, fiscal stimulus, and “a competitive trade position.”

  Deloitte Canada expects GDP to rise by 1.5 per cent in 2026. Chief economist Dawn Desjardins says Ottawa’s slate of infrastructure plans under its new Major Projects Office will inspire more private-sector investment in the back half of the year.

  “We expect stronger 1.9 per cent growth in 2026,” BMO economist Sal Guatieri wrote in a report earlier this month. “Assuming no nasty surprises on the trade front.”

  The Business Development Bank of Canada is the most conservative among recent forecasts, calling for one per cent growth this year.

• 39 mins ago John MacFarlane

  Monetary Policy Report (and growth forecasts) in focus

  

  Economists’ takes on the later-2026 cut-vs.-hike debate are likely to be shaped in part by today’s Monetary Policy Report (MPR), the BoC’s outlook for the economy, inflation and risks, which it updates quarterly.

  The BoC returned to giving a single base-case projection in October following two reports that offered up multiple scenarios due to heightened uncertainty caused by U.S. trade policies. Economic growth in the second half of 2025 was “broadly in line” with the October MPR, CIBC economists Ali Jaffery and Andrew Grantham wrote in a note last Friday. However, fourth-quarter growth appears muted, and they note that adjustments projecting further weakness would counter expectations for rate increases.

  “A nod towards the apparent slowing in activity again towards the end of the year may be perceived as a dovish signpost by a market still pricing in a greater risk of rate hikes this year than further cuts,” they wrote.

  BMO economist Benjamin Reitzes says the Q4 forecast in the October MPR “looks a bit optimistic and will likely be marked down.” He argues that projections for the first quarter of 2026 may be “introduced at a subdued level as well” but the overall 2026 forecast could receive “a modest upgrade.”

• 53 mins ago Leah Golob

  How the Bank of Canada's rate changed over the past decade

  The Bank of Canada's policy rate has swung sharply over the past decade, from pandemic-era lows of 0.25 per cent to a post-pandemic peak of five per cent.

  Here is a look at Canada's policy rate changes from January 2015 to December 2025:

  

  The post-pandemic steep rate climb means some borrowers who locked in ultra-low rates in 2021 will likely face a payment shock at renewal, some with increases of more than 40 per cent.

• Today at 12:38 PM UTC Leah Golob

  With upcoming CUSMA review, economic jitters mount in Canada

  Economic uncertainty remains high as negotiations for the review of the Canada-United States-Mexico Agreement (CUSMA) get underway. While Canada has been hit with tariffs on industries such as steel, aluminum, automobiles and lumber, its economy has fared better than expected in U.S. President Donald Trump’s trade war, largely because of the trade pact.

  Even so, businesses and consumers remain anxious about whether that agreement can withstand renewed talks. More than 91 per cent of Canadian business leaders believe the greatest risk to the economy is a poor outcome in CUSMA negotiations, according to a KPMG survey. The Canadian Chamber of Commerce notes that because of CUSMA, Canada, the U.S. and Mexico together account for nearly a third of global GDP.

  That uncertainty is already affecting corporate decision-making. Most respondents in the KPMG poll say their business has become less competitive because of proposed tariffs, and many warn they cannot absorb the added costs of shifting supply chains overseas if CUSMA collapses or is significantly altered. As a result, consumers could face higher prices while workers may see job losses — 79 per cent of business leaders say they have already cut, or plan to cut, their workforce within the next six months.

• Today at 12:11 PM UTC

  Sectors on edge as CUSMA negotiations near

  Uncertainty around the future of CUSMA has intensified following less-than-reassuring comments from the U.S. administration. Over the weekend, U.S. President Donald Trump threatened to impose a 100 per cent tariff on Canadian imports if Ottawa proceeds with its recent deal with Beijing.

  On Sunday, Treasury Secretary Scott Bessent specified Canada could face the 100 per cent levy if it were to enter a free-trade agreement with China.

  One of the industries most exposed to CUSMA uncertainty is the auto sector, which relies heavily on cross-border supply chains. About 72 per cent of Canadians worry that new vehicle prices could rise if the industry loses CUSMA protections. At present, most auto products crossing the border, particularly parts, are compliant with the agreement.

  Agriculture and agri-food producers are similarly on edge, as most agricultural goods, such as beef, currently move duty-free. In an open letter to Prime Minister Mark Carney, the Canadian Federation of Agriculture calls the trilateral agreement “instrumental in fostering a stable, integrated North American agricultural market.”

• Today at 12:00 PM UTC Leah Golob

  Why the Bank of Canada is likely to stand pat today

  Economists from National Bank, Desjardins, Royal Bank and the Bank of Montreal are widely expecting the Bank of Canada to leave its interest rate unchanged at 2.25 per cent in this morning’s announcement.

  It's predicted to be the second consecutive hold after policymakers said in October 2025 that rates are at “about the right level.”

  While the first two-thirds of 2025 showed weakness in the job market, the BoC said in last month’s statement that there were signs of improvement. Although December unemployment rose 0.3 percentage points to 6.8 per cent, that should not invalidate the central bank’s previous position, National Bank economists Taylor Schleich and Ethan Currie said in a note.

  Although December’s headline CPI came in higher than expected, that number was distorted by last year’s GST/HST holiday, says BMO economist Benjamin Reitzes. The BoC is likely to place greater weight on core CPI, which largely excludes tax changes and showed most core measures decelerating, he adds.

  Despite the consensus that the BoC will hold today, economists’ projections last December for the latter part of 2026 were more divided. Capital Group’s outlook suggests the BoC “will resist a cut amid muted inflation, but softness in the middle of 2026 may force their hand.” National Bank economists, by contrast, say “the worst is behind the Canadian economy” and expect rate hikes to kick in next fall.

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